New study encourages council leaders to support managed risk taking

11 Mar 2014

Latest research from leading business and advisory firm Grant Thornton UK LLP reveals more than 90% of local government respondents believe their organisation encourages well managed risk taking to drive forward innovation. However, it also highlights that a worryingly large proportion (40%) feel there is a lack of clear leadership in place when it comes to risk appetite.

This year’s Local Government Governance Review 2014, which examines the challenges confronting the sector in the face of continued austerity, also shows that a further third (28%) of those surveyed were expressing concerns about the blame culture within their organisations.

Commenting on the report’s findings, Paul Hughes, Director and Public Sector Governance Lead at Grant Thornton UK LLP, said: “Well-managed risks are important in driving innovation across the board, and while it is a positive sign that the majority of those surveyed feel that this is encouraged, clearer leadership is needed to really drive this forward.

“Local public-sector bodies have no choice but to change the way they operate if they are to maintain services in a period of financial austerity, and yet they are subject to intense formal and informal scrutiny when things go wrong. How this is handled is crucial – ideally, staff should feel supported when facing ‘trial by media’, rather than being subjected to additional blame from within the organisation. In this context, members have a vital role to play in setting an appropriate tone from the top.”

The study also identifies the challenges to good governance as councils adapt to dramatic changes in the way services are funded and delivered. While alternative delivery models (ADMs) will be crucial to the future success of local authorities, Grant Thornton’s analysis reveals that the risks that come with partnerships and alternative service delivery models tend not to be adequately dealt with by existing governance arrangements. Almost one third of respondents felt that there was no common understanding between all parties involved in delivering these services, with 25% doubting whether members and officers were clear about their individual and collective roles and responsibilities.

The report also finds that a lack of communication and clarity is an issue that needs to be addressed when it comes to communicating with the public. More than one third of respondents said the annual governance statement (AGS) failed to explain how local authorities handled risk, with a further 40% stating that they felt that the explanatory foreword did not help the public to understand the authority’s financial management.

Paul Hughes added: “As authorities engage with the public about how services will look in the future under continued austerity, they should use this opportunity to redefine their responsibility to the public and the role of the citizen. Many authorities have embraced social media effectively when communicating with the public on wider matters but have been very limited in respect of communicating performance on financial governance. Early, visible progress could be achieved by giving some real attention to addressing the failings of the explanatory foreword and the AGS.”